Good day and welcome everyone to the IDEX Second Quarter 2008 Earnings Results Conference Call. This call is being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to Vice President, Corporate Finance, Mr. Heath Mitts. Please go ahead sir.

Thank you, John. Good morning and thank you for joining us for a discussion of the IDEX second quarter 2008 financial results. Yesterday, we issued a press release outlining our company's financial and operating performance for the three months period ending June 30th, 2008. The press release along with the presentation slides to be used during today's webcast can be accessed on our company's website at www.idexcorp.com. Joining me today from IDEX management are Larry Kingsley, Chairman and Chief Executive Officer; and Dom Romeo, Vice President and Chief Financial Officer. The format for our call today is as follows. First, Larry will update you on our overall performance for the quarter across our company and four business segments. Then he will take you through our financial results for the quarter, and Larry will wrap up with the outlook for 2008 and the third quarter. Following our prepared remarks, we'll then open the call for your questions. If you should need to exit the call for any reason, you may access a complete replay beginning approximately two hours after the call concludes by dialing the toll free number 888-203-1112 and entering the conference ID 4450651, or simply log on to our company homepage for the webcast replay. As we begin, a brief reminder. This call may contain certain forward-looking statements that are subject to the Safe Harbor language in today's press release and in IDEX's filings with the Securities and Exchange Commission. With that, I'll turn the call over to our CEO, Larry Kingsley. Larry?

Thanks, Heath. Good morning. Now, a quick summary of our operating performance for the quarter. Orders were up 19%. Sales were up 15%. EPS was up 10% to $0.56 and we achieved record free cash flow of $61 million. Our business units performed well, and our acquisitions are contributing to our growth and our profitability per our expectations. Overall, we are pleased with our performance for the second quarter. If you look at slide six, as in the past quarters, I do this slide to summarize our end markets. The top of the chart here depicts our organic capability and market growth environment, our global position, and our business development focus. In the same order as depicted in the chart, our innovation led organic capability remained strong across the board. We are well positioned in the current economy. Our global position continues to improve. In fact as we look into the back half of the year, on the reassuring elements to our bullish thinking is the very strong international order activity, particularly from emerging country markets. So, we do think that some of the U.S. segments will remain slow or even continue to soften a bit, but that will be more than offset by a strong international order book. Our business development activity is never been better. Our focus to build out Fluid & Metering and Health and Science is first priority. The acquisition environment and our deal flow are both good. And I'll walk through the Q2 '08 performance and outlook by segment. I will start on slide seven with Fluid Metering. The Fluid & Metering grew 26% in the second quarter with organic growth of 8%. Our outlook for the market is continued strong growth. The global end markets of energy, chemical petrochemical, water treatment fluid and pharma…

[Operator Instructions]. Our first question comes from Mike Schneider of Robert W. Baird.

Good morning, guys.

Hi Mike.

Just some questions on the outlook. First, congratulations on a nice quarter. In Dispensing, it looks like the total organic growth rate forecasted for the year was ticked down by just one point from 4 to 6 to 3 to 5. Is that primarily just a slightly lower outlook on Dispensing?

It is, Mike. Basically, we are assuming that we are going to continue to see relatively soft domestic markets spend out of the smaller retailers and that some of the CapEx programs with the large retailers may push a bit as well. So that's built into the slightly lower organic assumptions for the full year.

And the large CapEx programs, have you actually seen project delays yet or you are just being conservative and anticipating them based on the market?

No, we have seen some delays.

Okay. And then, the margin in Dispensing, you mentioned raw materials hit you seemingly quite hard this quarter. What pricing actions have you taken and should we see the benefit of those in the second half?

First, maybe on across company comment, we actually did in the quarter realized both the cost mitigation actions as well as selective price actions essentially offset material on across company basis. Within Dispensing, sheets deal was the primary culprit what we saw fair amount of increase that we couldn't recover which generated a portion of that 330 basis points year-over-year. The back half of the year will probably recover some of that again both cost but also a little bit of price. On a company wide basis, we feel very comfortable that we're in good shape relative to material margin based on the actions that are already in place.

Okay. And then, just on the other side, so acquisitions, it looks like you actually took your forecast up a bit, what acquisition is driving the growth, is that Iso Tech or just a collection of them?

ADS, as you know we acquired right at the turn of the year continues to perform very well. So we had a little bit of an improved outlook there associated with wastewater segment.

Okay, thank you. I will get back in line.

Okay, Mike.

Our next question comes from Matt Summerville with KeyBanc.

Couple of questions. First, can you talk about the mix you encountered in FST during the quarter? As I recall that fund banded in the rescue tool businesses tended to carry higher margins or may be suppression was a little lower than segment average?

Yes Matt, that's a correct statement. And actually, we've seen the benefit of that the last quarter and couple of quarters prior. The issue within Fire & Safety was really mixed within the three components this quarter really, where we didn't see a strong margin contribution from the two that are typically a little bit higher. However, I would tell you that we don't think that's part of a trend rate. As a matter of fact, as we look into the order book, I think we will see a nice contribution as a function of mix as we look into the back half.

And just a follow on to Mike's question, have you actually put in place a price increase in Dispensing for the back half of the year, is something been announced in the marketplace?

There really aren't price book actions within Dispensing. Dispensing is project-by-project pricing environment. So, there really isn't a phenomenon of take the price, price book up by x%. So, no, the answer within that specific product segment, there isn't an action that's across segment that would be similar to what you've seen in some of the other businesses. All I have said, we typically do see price opportunity as the function where we have material cost increase. So, on a project specific basis, we'll reflect those cost is how we think about the pricing specific to the opportunity.

Based on some of the design wins you've had, new products coming to market, I guess as we look out several quarters with respect to HST, do you anticipate as we move into next year, a pretty meaningful reacceleration in organic growth in this business relative to what you've seen in the last few quarters and I guess just trying to gauge your level of confidence there.

Yes, the short answer is yes. The core growth in HST, which is as we all know displacing some of the opportunistic OEM works have been sun setting through the course of the year is extremely strong and with the assumptions of those markets stay reasonably sound, I think we'll see very nice growth on an HST segment basis.

And, then just one more on FST and then I will back inline. Can you talk about what you saw domestically with respect to rescue tools and fire suppression, just maybe a little more detail behind the numbers there and the suppression business as I recall has easier comps in the back half of the year and I guess do you anticipate further degradation on those easier comps?

Yes. As you remember, when we talked two quarters ago about our expectations for the domestic suppression business being down in the first half and then essentially sequentially flat in the back half, I think that still the order of the day. We are anticipating that the U.S. domestic... the U.S. fire suppression markets is fairly stable at this point. We are seeing pretty healthy order rates out of most of the truck OEMs now and we will watch it closely. But we don't expect that we are going to see sequential degradation. So yes, relative to easier comps on suppression, we should see some nice growth opportunities. Rescue tools is benefiting from very strong international growth from a number of markets that frankly we have participated in historically. So we anticipate that rescue tools will do well all up globally for the back half.

Alright. Thanks, Larry.

And Matt, that's... by the way that's all assuming our third quarter guidance where Larry mentioned that FST is expected to have a high single-digit growth rate for the third quarter.

That's it, thank you.

Your next question comes from Ned Armstrong, FBR Capital Market.

Yes, thank you. Good morning.

Hi, Ned.

Yes. You've done a nice job of BAND-IT in expanding into new markets there, particularly the oil and gas; I know it has been very helpful to that unit's performance. Can you just go through some other applications that you're looking at that may not have really booked a lot of revenue yet, but hold promising prospects.

BAND-IT, Ned is the tail of a very diverse application set as you know and the BAND-IT team applies both the combination of the IDEX tools and even a couple of BAND-IT specific tools to how they go about understanding where their product offers a differentiated and improved benefit to the customer. They've done over the last year, I would just tell you, a phenomenal job in analyzing and grounding, winning new business where we are now as you... I think you've heard us talk a bit about how we are doing banding applications for assisting jacketing installation and the process control environment. We are doing a lot of things that are associated with harsh atmosphere, environment application better in manufacturing and process in general. We've got some other on vehicle applications that we are not going to talk specifically about for market competitive reasons, that will generate very nice volume in the months to come. But the BAND-IT business, if you look at the revenue breakdown, it's the product of 100s of applications and a good chunk of those are growing nicely. So, it's not in any way dependent on upstream energy, down hole application or a sub-sea pipeline application alone. But those are certainly noteworthy right now given the nice volume that we are seeing there.

Okay, good. Thank you.

Sure.

Our next question comes from Ajay Kejriwal of Goldman Sachs.

Good morning, gentlemen.

Hi, Ajay.

May be couple of detailed questions to start with. If you could give us the flow through to the operating income line from ForEx for the quarter please?

Excuse me Ajay, from what?

From ForEx translation what was the flow through to the operating income line?

Sure

Yes Ajay, maybe the best place to start, let's go back to slide 12 and let us walk you through to kind of how we bridge out margin. If you look at the op margin of 18.6 as reported, acquisitions due to the amortization of intangibles was about a 60-basis point impact. And then if you look at FX and again that's a bit of a theoretical calculation, but currency at the current rate at 3% plus of growth, doesn't flow through the 18.6%, so I had about a 20 basis point impact year-over-year versus the 20% from last year. And as Larry mentioned, the 70 basis points on the slide is a combination of mix, also higher incentive compensation accruals and some selected material price increases. That 70 basis points is about $3 million. Each of those impacts was about $1 million each. So, the short answer is flow through ex those items is well above kind of our company average as expected from the price and the cost initiatives, but when you exclude FX and obviously acquisition and that 70 basis points from mix, incentive comp and material price obviously get the flow through. So, this quarter it's a bit of a longer to answer, the flow through has been achieved, but you've to look at the impacts in those buckets.

So, the... just so I understand this, flow through on account of ForEx is mid single-digit?

Yes, similar to that range. Again, it varies by country, but if you look at versus the 18.6, the way we look at margin rate, it is about 20 basis point reduction in our margin year-over-year.

Got it, great. And maybe if you have that readily available, growth by geography for FMT and Dispensing?

I think we did not currently goes through that. But my comments were essentially as far as it would go, but basically strong international growth, I'd say great growth in Asia, double-digit obviously. Double-digit emerging market growth, solid European growth and then not far trailing was our all of our aggregate domestic growth.

So, you did see growth in FMT in the U.S., but would it be fair to say it was positive but may be below segment average?

Mid single-digit.

Mid single-digit, very good. And moving to Dispensing, I know you've talked about restructuring in the past, but maybe if you could help us understand and maybe provide some background on why the need to resize the capacity now, is that you are seeing lower growth in Europe or is it some other secular trend?

No, it's really Ajay, the function of both the long-term thinking for what we want to do globally with the product line. You probably heard us talk a bit about our global roadmap and our global scalable footprint for Dispensing, which allows us a fair amount of manufacturing flexibility, where we make the product against the global design, modular in both the mechanical structure as well as the power structure of the product. And when we looked at the games on productivity globally and the opportunity we have going forward coupled with the fact that we don't think we will need that capacity short term, this was an appropriate action to be taken. So, it's really consistent with our capacity utilization thinking of roadmap thinking and then obviously it's going to be really nice benefit for us for the first full year. It's a great pay back.

Got it, great. And maybe lastly, coming back to that pricing raw material question asked earlier, would you be able to provide the dollar amount of raw material headwinds in the first half or for the quarter?

Well, it depends on not the... it's not but it depends on how you think about headwinds, because we really did offset all but the... what, it was 1.8 million or so of that?

Theprice on sales that was 2% for the quarter.

Yes, so if you'd sell for, I think about P&L price first, 2%, which has been a pretty consistent number for us quarter-on-quarter, year-on-year. Then cost mitigating actions essentially across the company other than sheet steel where we did take little bit increase in the quarter and also we saw some pig iron associated increase in some of the areas where consumers for pig iron for castings --

So, was raw material inflation above that 2%? Because you got pricing and then you got some productivity as well, right?

Ajay, only within dispensing is where we called out the delta which is about $1 million impact for the selective material cost within dispensing. All the other units offset cost with the actions on global sourcing and or price.

Got it. And your full year estimate assumes pricing more than offsetting raw material inflation?

That's correct.

Got it.Great, thank you.

Thank you.

Our next question comes from Amit Daryanani of RBC Capital Markets.

Thanks a lot. Good morning, guys.

Hi there.

Just got a quick question on organic order growth of 7% is obviously impressive given some tough comps you had. Is there a way to slice it based in different geographies if you have that numbers?

Now, again we're not going to go there right now in terms of how we look at it by geography. The short answer though just to maybe help you feel good about it, it was reasonably strong across the globe.

Alright. I guess maybe if I just look at the Dispensing side, I think you had said, Europe is about 60% of the business there, North America is 20%, it sounds like Europe seems to be holding in pretty well right now and North America has softened up. Just given all the macro environment data that's coming out of Europe, it sounds like they are starting to slowdown now just the way North America did a few quarters ago. Why the conviction and the confidence that Europe is going to keep holding in on the Dispensing side going forward?

Well, Europe has been a fairly stable growth element to Dispensing for multiple years now. In fact we had fairly decent line of sight to the project activity there. And the case in Europe with the pink companies are planning to spend, so, no, we don't have huge growth baked in, as you can tell here by the way that put us to back half of the year for dispensing. I think we are just saying for dispensing, we are expecting flat to modest growth and that Europe will be stronger than North America. The emerging markets also though are growing pretty nicely for Dispensing, and we are seeing Eastern Europe, Middle East, some of the other country markets that haven't been using the automatic dispensing equipment adopted for the first time. So, some of that gets booked in Europe, which also provide us with a little bit of reassurance with respect to not being a slowdown at least as we can foresee at this point.

Fair enough. And then in terms of the restructuring benefits of $3 million to $4 million in '09, is the essence at this point is going to be more sort of backend loaded into back half of '09 or would it be pretty evenly spread across 2009?

Pretty evenly spread.

Alright. And then just finally on the Fluid Metering side, I know on a year-over-year basis you kind of outlined the margin degradation was due to acquisitions and product mix. Just to make sure on the sequential drop that we had about 70 basis points, that was I assume primarily mix-driven?

Yes, yes, essentially so.

Perfect, thank you.

You're welcome.

[Operator Instructions]. We'll go back to Mike Schneider with Robert Baird

Guys, maybe you could just address HST growth in the third quarter. In your guidance on slide 19, it says a low single-digit growth again. I'm curious, shouldn't the growth at least be reaching mid single or even upper single-digit growth at this point as we lap the two OEM contracts in the third quarter or is my timing wrong?

Mike, your timing is off just a bit. The headwind that's built into that low single-digit comment that's associated with those two OEM contracts is actually fairly strong year-on-year. We basically don't lap that fully until the end of the year.

Okay. And just in terms of the acquisitions, you walked through some of the margin pressure that they created. Are there still lingering inventory write-ups that are passing through the P&L that we begin... that we shed as we go into the third quarter or is this just the lower embedded margin of the businesses that are acquired that's coming through right now?

Mike, it is actually not inventory but the amortization of intangibles. So if you look at that 60 basis points for this company average in the current amortization that we discussed, it's amortization versus any inventory impact.

So there is no natural step up in the margins as we go through the balance of the year, this is the run rate?

For the balance of the year, correct. But as we move forward, we expect margins to naturally improve the way the rest of the company does. But the amortization will continue at that rate.

Okay. And Larry, could you address acquisitions? I know you guys have been active. You described the pipeline as good. That isn't exactly an exciting adjective. I am just... has something changed or if you meant more than that?

Mike, I would maybe just to give you something more exciting than good, I'd tell you that the pipeline has never been better. We've got a good set of very nice proprietary deals and other transactions in mind for the back half of the year that we're working hard this summer on. And frankly, I think we'll be very pleased with our results at the end of the year in terms of the acquisition contributed growth and the strategic nature of how these fit for building out Fluid & Metering and Health & Science in particular. So, now actually I feel very good about what we can capitally deploy here between now and year end. I think there is some good stuff out there that makes a lot of sense. We're going to see them at IDEX like multiples that make sense for us and return models. They will be a real solid addition to that to the portfolio.

Thank you again and sorry to parse the words so closely.

No, thank you, Mike.

[Operator Instructions].

Well, I think we are going to go ahead and wrap up. I want to thank everybody for joining. Obviously, a very solid second quarter for IDEX in a way we are well positioned, we are thinking that the current economy and the environment looking into the back half of the year, we remain cost control focused, but at the same time we'd like to say we continue to invest in the businesses where we think we have got super growth opportunity. So we look forward to the back half of the way. Thanks for joining.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may disconnect at this time.